Question

1. The Sloth Mattress Company offers its customers a 30-day free trial of its mattresses. It extends this trial to 90 days. According to the endowment effect, should we expect the percent of mattresses returned to increase, decrease, or remain the same? Explain your answer.

Answer 1

In psychology and behavioral economics, the endowment effect is the finding that people are more likely to retain an object they own than acquire that same object when they do not own it. so if the trial period increases from 30 to 90 days and people end up keeping those mattresses for a longer time with them, they will most probably not return it. Hence we can expect that % of mattresses returned will decrease. people will end up retaining their mattresses rather than returning them after 90 days